Facebook, Instagram, and Ads

I think the real reason for the Instagram purchase, and the incredible price tag, is access to a potentially lucrative mobile advertising product.

Mobile advertisements are potentially more lucrative than standard “desktop” web advertisements, yet most companies have been doing them wrong for years. The majority of mobile advertisements have tried to replicate the web’s model with simple images users can click to be directed to a website. Others, including Apple with iAd, have tried to do things a little differently, yet the numbers are smaller, and incredibly so, than, say, Google’s revenue with ads on search and desktop websites. Mobile advertisements could keep users more “engaged” with promoted products by leveraging aspects like location, cameras, touch, apps – yet only a handful of companies seem to be betting on the future of ads as richer experiences built for mobile, not extrapolated from computers.

Facebook is a company that along the way found a business model and a culture that allows them to believe they are doing good things. That’s in their IPO filing. With the Instagram acquisition, one can only assume Facebook will want to start making some money with it eventually, and because Instagram is mobile, and photos are huge on mobile, Facebook will find a way to monetize both Instagram and Facebook’s mobile products.